Pivotal Performance

By adapting their sales models, vendor relationships and pricing, the 2023 SDM Top Systems Integrators performed exceptionally well in spite of significant obstacles.

This year’s top systems integrators are largely in agreement on how they fared in 2022. Unlike their security dealer counterparts on the 2023 SDM 100, the security integration companies — and sometimes even the integration side of the same company ranked on both lists — had no trouble coming to a consensus that the market was mostly strong, especially in verticals such as healthcare, financial, utilities and education, among others.

But all was not perfectly rosy in 2022 and going into 2023. There were plenty of challenges, not least of which are continuing supply chain headaches, along with the added pressures of rising inflation rates, a critical workforce shortage and the possibility of a looming recession.

Still, much of what this year’s top security integrators have to say is positive.

“In 2022, the market for security systems sales and integrated systems projects was strong — driven by the expanding need for more digitally advanced and highly customized security systems to protect facilities from evolving threats,” writes No. 1 ranked Convergint. “Convergint saw significant advancement across verticals in 2022, including the healthcare, financial and utilities markets. Despite ongoing supply chain disruptions, Convergint successfully maintained its growth and commitment to being its customers’ best service provider.”

No. 1 — In 2022, Convergint greatly advanced its global growth into new markets, expanding operations to Australia, Canada and the United Arab Emirates. Acquired Ojo Technology in August 2022, Beckwith in December 2022, and Ballou Fire in June 2023. SDM’s 2007 and 2012 Systems Integrator of the Year. No. 2 — Launched as Securitas Technology in March 2023 after completing its acquisition of STANLEY Security in July 2022. SDM’s 2011 (as Diebold) and 2019 Systems Integrator of the Year. No. 3 — Completed its first pilot sale for its EvoGuard brand of autonomous intelligent guarding solutions in March 2023. Closed a $1.2 billion equity investment by State Farm in October 2022. Acquired IOTAS in June 2022 and Denver-based Key-Rite Security in May 2022. No. 4 — Acquired Premier Security Solutions in May 2023, Security Source in April 2023 and Netronix Integration in March 2023, its three most recent in a string of ongoing acquisitions in 2022 and 2023. Changed name to Pavion from CTSI in October 2022. SDM's 2022 Systems Integrator of the Year. No. 5 — Acquired Elite Tactical Security in April 2023. Sealed three deals to grow in North America and beyond in June 2022. Acquired Hawaii-based Star Protection Agency in May 2023. SDM’s 2016 Systems Integrator of the Year (as Securadyne Systems). SDM’s 2013 Systems Integrator of the Year (as G4S). No. 6 — Completed the unification and rebranding efforts of two acquired entities (purchased in 2021). Paladin Technologies acquired VTI Security and Spectra Audio Design Group, adding 350 new colleagues to the team. Ranked on the TSI for the first time. No. 7 — Strong sales performance from ADS Security business unit as it integrated with Vector Security. No. 9 — Partnered with Alarm.com to bring Proptech to the multifamily market in December 2022. SDM’s 2015 Systems Integrator of the Year. No. 10 — Continued the integration with IST, which it acquired in March 2022. SDM’s 2014 and 2021 Systems Integrator of the Year. No. 11 — Ranked on the TSI for the first time. No. 12 — TSI was able to grow revenue by over 27 percent and added several Fortune 500 clients as well a multiple new IDN’s in the Healthcare space. Merged with Securitronics in October 2022. SDM’s 2004 Systems Integrator of the Year. No. 13 – SDM’s 2017 Systems Integrator of the Year. No. 14 — Acquired Homeguard Security in March 2023 and Dream Systems’ Security Division in August 2022. No. 16 — At the beginning of 2022, RFI’s COO/president, Brad Wilson, passed away unexpectedly. The senior leadership team, which had been in place since 2019, pulled together to lead the company to have its best year ever. No 17 — Acquired another company (Maine-based Inlution) while changing over both its CRM and financial systems internally to move systems into the cloud, both running concurrently. Rebranded in January 2023. No. 18 — Grew into 3 new markets (LATAM, SoCal, Seattle). Opened a new Global Technology Center in March 2023. SDM’s 2020 Systems Integrator of the Year. No. 19 — Pye-Barker continues its acquisition streak with more than 20 acquisitions in 2022 and so far in 2023, including current TSI-ranked company Sonitrol of SW Ohio (ranked No. 66 this year) purchased in March 2023 (after the submission date for the 2023 TSI), and most recently, Automatic Fire Sprinklers and Vanguard Fire & Security Systems, in May 2023. No. 20 — Ranked on the TSI for the first time. No. 21 — Sales increased 75 percent; revenue increased 50 percent; and staff grew by almost 15 percent. No. 22 — Had the highest revenue year in its 40+ year history. No. 25 — Added its 7th branch location, and 4th out-of-state company, expanding its presence in the New England region. No. 28 — Increased revenue by 10 percent and increased bottom net line. No. 30 — Had its biggest year of sales bookings, over 35 percent more in 2022 than in 2021. No. 32 — The acquisition of Carehawk Inc. in Ontario allows JSC to integrate the Canadian manufacturing business with its U.S. distribution business. No. 33 — Integrated 60 percent of its internal systems by converting its data to an extensive CRM platform. No. 34 — Ranked on the TSI for the first time. No. 35 — Sold its largest project ever, $4.5 million dollars to a county. No. 37 — Acquired by Zeus Fire & Security in May 2023. No. 38 — At the end of the year had its highest revenue and highest profits to date. No. 40 — Ranked on the TSI for the first time. No. 42 — Successful rollout and ramp up of its Richmond branch location. No. 50 — Acquisition of Arcuri. No. 53 — Purchased a new headquarters building in 2022 that triples its space with plans to renovate it in early 2023. No. 54 — Awarded a new five year contract term with the State of Arizona. No. 56 — Started a solar division as a bolt-on to its security company with adoption rates that exceeded expectation. No. 58 — Successfully completed the 3G communicator upgrade project prior to the sunset(s). No. 59 — Grew RMR by 20 percent. No. 62 — Largest sales year since company was established in 1916. No. 65 — Moved to new HQ in Melbourne and brought executive and management teams under one roof from remote locations around the state. Ranked on the TSI for the first time. No. 67 — Ranked on the TSI for the first time. No. 70 — In late 2021 into 2022 grew from one office with 15 employees to four total offices and close to 40 employees. Throughout 2022 continued to invest in the new offices and toward the end of the year profitability has skyrocketed and the new offices are performing better than expected. Ranked on the TSI for the first time. No. 71 — Acquired, moved to, and are building out a new warehouse/technical center. Ranked on the TSI for the first time. No. 74 — Increased revenue in 2022 significantly. No. 75 — increased RMR and IR by 20 percent organically in 2022. No. 76 — Ranked on the TSI for the first time. No. 78 — Complete remodel of its corporate office and relocation of its central station into the corporate office. No. 80 — Won a significant security integration project from a nuclear power plant. No. 81 — Completed the Ina A. Colen project, a $2.4 Million K-8 charter school. Ranked on the TSI for the first time. No. 87 — Generated significant RMR from monitored surveillance systems. No. 92 — Grew headcount from eight to 20 employees. Ranked on the TSI for the first time. No. 95 — The purchase of Mid South Security Gave KMT a second office and more internal people to continue to grow with. No. 96 — Obtained a city and state contract with the largest health and hospital facilities. No. 99 — Acquisition of another company that expands Alert Protective into another location providing further service abilities.

No. 4, Pavion (formerly CTSI), described the 2022 market as “average” but with “pockets of strength in video surveillance and monitoring,” noting as many others did as well, the supply chain headwinds and delays in critical chip supplies.

While the theme of supply chain issues was repeated over and over again, many of the top 100 security integrators reported banner years in spite of it.

“Overall the market in 2022 continued to be strong with bookings and overall demand, vastly outpacing 2021,” writes No. 8, The Cook and Boardman Security Integration Division. “Projects for integrated security systems within our organization increased by 119 percent. Education continued to have strong demand along with state and local government agencies due to increased funding for security. Our organization also saw growth with commercial/enterprise clients and critical infrastructure.”

No. 21, Preferred Technologies LLC, writes: “We grew substantially using our own cash, all while strengthening our culture. Sales increased 75 percent; revenue increased 50 percent; and our staff grew by almost 15 percent. … The 2022 market for security systems was stronger than 2021.”

Enterprise Security Inc., No. 30, attributes its strong performance to the after-effects of the pandemic. “It was our biggest year of sales bookings — we booked over 35 percent more in 2022 than we did in 2021. … We are seeing huge demand in a post-pandemic setting. Customers are now breaking loose on budgets. Our biggest challenge remains to find qualified technicians. We experienced significant growth in the government sector. Supply chain issues persist.”

No. 35, Vision Security Technologies, echoed that sentiment very closely, writing: “We sold our largest project ever $4.5 million dollars to a county. … We grew over 30 percent in 2022 and 2021 was a record year so the market is strong. Government and education were high growth verticals. Supply chain has been and is still a major issue. We are extremely proud of how we’ve been able to manage it and still grow.”

Collectively, the top 100 systems integrators performed exceptionally well in 2022, amassing a whopping $6.58 billion in North American integration revenues — a 47 percent increase over last year and the second highest reported number in the past decade (the highest was in 2014, at $6.81 billion). Part of this was due to the addition of some large integration companies this year, including Paladin Technologies, ranked, No. 6; MCA, ranked No. 11; and Prosegur, ranked No. 20. Securitas, ranked No. 2 and LVC Companies, ranked No. 22, also returned to the report this year.

Profits were also up 5 percentage points over last year, though some report that was a greater challenge to achieve than in the past.

“We were able to increase revenue over 2021, keep all our employees and gain some new clientele,” writes No. 55, Telenet VoIP Inc. “The market showed some signs of growth. Larger projects came to the market; however, competition is extremely high and margins are low. Supply chain and increases in material costs have definitely been a factor in lower profit margins and prolonged completion schedules.”

No. 75, Titan Alarm Inc., summed up the market this way: “We increased our RMR and IR by 20 percent organically last year. The 2022 market was just as strong as the 2021 market. The key difference between the two was the inflation that hit during this year. This raised prices, slowing the purchase of goods and services.”

Pivoting to Meet Challenges

While some of the exceptionally strong performance can be attributed to new companies joining the rankings, that is not the only reason. Many of the top security integrators tell a similar story of how they met the challenges of 2022 and the start of 2023.

There is no question there were tough obstacles in 2022. No. 71, CTCI, notes that it did experience weaker revenue compared to 2021, specifically because of supply chain issues. “We found that our largest external issues were related to the supply chain. We are still waiting for readers that were ordered over a year ago! While this constraint seems to be relaxing slightly, it is still a large concern. As a result, we were either forced to pivot to whatever products were available or wait for delivery of specified material, causing completion delays and customer dissatisfaction.”

No. 6, Paladin Technologies, writes: “Throughout the ongoing recovery of COVID-19, we were impacted significantly with supply chain through 2022, both on the client and construction side, as well as our manufacturer supply chain. Further to supply chain, growing our workforce organically has been a challenge. Like many, we have struggled to recruit and retain people — we are always in need and it’s hard to forecast resourcing needs when supply chain delays then impact our project timelines.”

This was the case for the majority of companies ranked this year. However, several shared specific ways they had changed their approach to keep customers happy, projects on track (as much as possible) and money flowing.

For example, No. 8, The Cook and Boardman Security Integration Division, writes: “We continue to see supply chain disruptions specifically related to video surveillance and access control manufacturers, which resulted in project delays. However, we have adjusted how we work with our solution partners to mitigate the impact internally and for customers. Our purchasing strategy has also changed to minimize impacts and we are working closely with manufacturer and distributor partners to source products that are more readily available. Furthermore, we have seen improvement on correct forecasting of delivery dates despite these impacts, which has allowed us to improve our customer experience and schedule project resources more accurately.”

No. 29, Advanced Electronic Solutions, shares: “Changes in the market and the consistent issue with obtaining supplies created problems completing jobs. AES was able to think outside the box to finish jobs (albeit sometimes beyond the original completion date).”

Wilson Fire, No. 62, notes it had to find alternate available products due to supply chain issues, along with purchasing from non-dealership vendors to get products in time.

Kevin Santelli, vice president – commercial and national accounts business, for No. 45 ranked Guardian Protection, writes: “2022 was also a year of ongoing labor and supply chain shortages, requiring us to be more accurate with forecasting in all parts of our business. We made significant investments in stock inventory to guarantee we would be able to meet the needs of our customers on time and on schedule.”

And Peak Alarm, No. 46, says that its greatest accomplishment in 2022 was “being able to rise above the one-two punch of inflation and workforce shrinkage to come out with stronger than expected financial results. We accomplished this through aggressive pricing strategies, allowing us to retain margins and deleveraging so that the cost of interest was not an anchor dragging us down.”

2023 Predictions

Looking ahead, confidence remains high in 2023 — with caveats. While 79 percent expect revenue to increase, up slightly from last year’s predictions, comments do show some uncertainty, though many are tempered with positive predictions and proactive plans to handle any obstacle.

“Labor shortages and inflation will negatively impact business in 2023; we also expect a weaker economy,” writes No. 87, Valley Alarm. “On the positive side, we expect RMR sales to remain very strong.”

Region 6 Security Integration, No. 92, is one of several companies that are already seeing supply chain woes easing: “Supply chain is obviously a disaster for everyone, but we are starting to see things normalize.”

No. 25, American Alarm & Communications, writes: “Inflation and interest rates will be the biggest threat to our business in 2023, combined with the escalating wage rates caused by a shortage of licensed technicians. COVID-19 has become less disruptive to the business. Cybersecurity is still a big concern for companies as is crime/active shooters which will continue to bring demand for security solutions.”

TRL Systems Inc., No. 28, believes we are already in a recession: “The economy will have the biggest impact in 2023. We are in a recession — no doubt. We are already seeing companies looking to reduce cost and we are seeing projects/sales that we were expecting in early 2023 get pushed to end of year or 2024.”

But just as they faced the challenges of the past year (and the COVID years prior to that), the top security integrators are by and large optimistic about their ability to adapt and overcome them to succeed.

No. 16, RFI Communications & Security Systems, is developing some ideas to help mitigate the talent shortage: “The biggest impact for 2023 is the lack of skilled labor and continued impact of rapid inflation on margin. Distinguishing ourselves by focusing on the basics through operational metrics, customer service and providing a positive culture will aid in attracting and retaining strong talent. Continuing to provide opportunity for professional development will allow us to invest in the next generation integrator.”

No. 46, Peak Alarm, plans a similar approach: “Two factors will impact our business in 2023, continued inflation and its effect on the workforce; and pricing to customers and the shrinking labor market in our region, which has the lowest unemployment in the United States. To combat this we have to continue to be the employer of choice in our area, attracting and retaining top talent who in turn can give excellent service to our customers.”

Fortress Security, No. 79, writes: “Rising interest rates will have the greatest impact operationally as well as dimming the sales forecast. Operational efficiencies created from implementing technology enhancements will improve our speed to closing sales and serving our existing customers, creating higher margins.”

LVC Companies Inc., No 22, sums the coming year this way: “The economy and continued supply chain challenges will remain uncertain. Strategizing on successfully navigating these issues will be the key to success. There are economists that have varying opinions on if we are headed for a recession, the FED is trying to curb inflation and the markets have been volatile. Big Tech companies have eliminated positions and cyber is a high focus that is costly, difficult and increasingly challenging. Manufacturers are not holding prices very long and the costs are very unstable during various stages of a project, specifically when the products are available and ready to ship. Education and communication will remain an essential, along with following the data to ensure and manage customer expectations while managing margin stability. Recruitment and retention are at the forefront for everyone and require constant and consistent evaluation, to position ourselves at a high level to build and maintain our strong workforce.” SDM